Crockett, J., delivered the opinion of the Court:
The facts of the case are, that the plaintiffs loaned to the defendant $5,000 in gold coin, and took his promissory note therefor. At the same time, and as collateral security, the defendant endorsed, transferred and delivered to the plaintiffs a promissory note of one Ferguson for $12,000, payable to the defendant' on his order or demand. It further appears that a large proportion of the debt from the defendant to the plaintiffs remains due and unpaid ; that Ferguson resides in the State of New York, and the plaintiffs caused the note for $12,000 to be presented to him for payment, which was refused, and the note was thereupon protested for non-payment.
[350]*350The complaint in this action states, substantially, the foregoing facts, and prays for a foreclosure and sale of Ferguson’s note in satisfaction of the debt due from the defendant, and for a personal judgment against the defendant for the deficiency. The answer does not deny the foregoing facts, but sets up as a defense to the action, that it is the duty of the plaintiffs to collect Ferguson’s note by process of law, and apply the proceeds to the satisfaction of their demand; and that the Court has no authority to decree a foreclosure and sale. On the trial, the District Court decided the transaction to be a pledge, and not a mortgage of Ferguson’s note; and held, as a conclusion of law, that the plaintiffs, as pledgees, have no authority to sell the note, or cause it to be sold, in satisfaction of their demand, and cannot maintain an action for the foreclosure and sale thereof.
The Court also refused to enter a personal judgment against the defendant for the amount due, and dismissed the complaint with costs; and thereupon the plaintiffs have appealed.
If the transaction be held to be a chattel mortgage and not a pledge, it is conceded by counsel that it might be foreclosed, as any other mortgage. Treating it as a mortgage, no reason has been suggested why it might not be foreclosed. Nor do we understand counsel as controverting the proposition that a pledgee of personal property may, if he elects so to do, cause the pledge to be sold, under a decree of a Court of Equity, in satisfaction of the debt. But it is insisted that a pledge of commercial paper, such as notes, bonds and bills, stands upon a different footing, on account of their peculiar nature; that in the absence of a contract to that effect, authorizing a sale of them, the pledgee has no power to sell them or cause them to be sold by a decree of a Court or otherwise, and can only make them available by collecting them in due course of law.
For the purposes of this decision, we shall assume that the transaction in question was a pledge and not a chattel mortgage, and shall assume it, also, as a conceded point, that a pledge of personal property may be foreclosed by a decree of a Court of Equity, in the same manner and with like effect [351]*351as if it were a mortgage. This brings ns to the question whether or not a pledge of a bond, bill or promissory note stands upon a different footing. The argument for the respondent on this point is founded chiefly on considerations of public policy. It is said that to permit a sale of such securities would often, and perhaps generally, result in a ruinous sacrifice, greatly injurious to the debtor, and equally so to the creditor, unless he should avail himself of his superior information in respect to the solvency of the maker of the paper, to purchase it at the sale for less than its value, which would be a great hardship upon the pledgor; that a sale of the paper is not necessary to enable the pledgee to make it available for the satisfaction of his demand, inasmuch as he is clothed with the necessary power to enable him to enforce the collection of the security pledged; which is all that the pledgee can reasonably demand.
The leading case relied upon in support of this proposition is Wheeler v. Newbould (5 Duer, 29), and afterward affirmed in 16 New York (2 Smith, 392.)
The facts of the transaction in that case were very similar to those we are considering; but in that case, instead of resorting to a Court of Equity to procure a judicial sale of the note which was pledged, the pledgee caused it to be sold in the market, without a proper demand and notice, and it was the validity of that sale which was in contest. The Court held the sale to be void, first, for want of a proper notice ; and, second, on the ground that in the absence of a contract expressly authorizing a sale, the law would not imply an authority in the pledgee to sell the security for his indemnity, nor any authority except to collect the amount due on the notes which were pledged, and to apply the proceeds in satisfaction of his demand. The precise point before us in this case, to wit, the right of a pledgee to resort to a Court of Equity for a sale of the security, was not involved in that case. The Court does not decide that under special circumstances a sale may not be decreed. On the contrary, it says: “In holding as we do, that a pledge of dioses in action, created by private individuals, and having no market value, is not an implied authority to sell them, we are not to be under[352]*352stood as saying that a sale may not, under special circumstances, be decreed by a Court of Equity. We decline, however, to express or intimate an opinion upon a question which is not before us, and which, when it arises, will demand a serious consideration.” It is evident, however, that the Court intimates that a sale could only be decreed under special circumstances.
In Brown v. Ward (3 Duer, 660), and in the Atlantic Fire and Marine Insurance Co. v. Boies (6 Duer, 583), similar views are expressed in respect to the authority of the pledgee to sell commercial paper pledged as security in satisfaction of the debt. These are the only authorities to Avhich our attention has been called in support of the proposition; and hoAvever the law on that point may be in New York, I am satisfied a different rule must prevail here.
Under Section 246 of our Practice Act, if commercial paper be mortgaged, the mortgage may be foreclosed and the securities sold under the decree; and by Sections 217 and 220, such securities may be seized and sold under execution on a judgment at law. (Davis v. Mitchell, 34 Cal. 87.) We must infer that the policy of our law is not opposed to such sales, Avhen they are expressly authorized on the foreclosure of a mortgage, or upon seizure under an execution at laAV. The same reasons Avhich would forbid the sale of commercial paper which is pledged, would apply Avith full force to a sale of such paper under the foreclosure of a mortgage, or under an execution at law. In each case, the danger of sacrificing it for an inadequate price would be the same; and, inasmuch as a sale is expressly authorized in the íavo latter cases, we can perceive no reason why a different rule should prevail when it is pledged.
The conclusion reached by the Court in Wheeler v. Newbould (supra), and the other cases referred to, is founded on the assumption that commercial paper has no intrinsic market value; that it is not, strictly speaking, merchandise; that its value depends on the solvency of the maker, which may not be generally known; and hence, that if exposed to sale, it would generally sell for an inadequate price, and result in a ruinous sacrifice to the pledgor. It is conceded, [353]
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Crockett, J., delivered the opinion of the Court:
The facts of the case are, that the plaintiffs loaned to the defendant $5,000 in gold coin, and took his promissory note therefor. At the same time, and as collateral security, the defendant endorsed, transferred and delivered to the plaintiffs a promissory note of one Ferguson for $12,000, payable to the defendant' on his order or demand. It further appears that a large proportion of the debt from the defendant to the plaintiffs remains due and unpaid ; that Ferguson resides in the State of New York, and the plaintiffs caused the note for $12,000 to be presented to him for payment, which was refused, and the note was thereupon protested for non-payment.
[350]*350The complaint in this action states, substantially, the foregoing facts, and prays for a foreclosure and sale of Ferguson’s note in satisfaction of the debt due from the defendant, and for a personal judgment against the defendant for the deficiency. The answer does not deny the foregoing facts, but sets up as a defense to the action, that it is the duty of the plaintiffs to collect Ferguson’s note by process of law, and apply the proceeds to the satisfaction of their demand; and that the Court has no authority to decree a foreclosure and sale. On the trial, the District Court decided the transaction to be a pledge, and not a mortgage of Ferguson’s note; and held, as a conclusion of law, that the plaintiffs, as pledgees, have no authority to sell the note, or cause it to be sold, in satisfaction of their demand, and cannot maintain an action for the foreclosure and sale thereof.
The Court also refused to enter a personal judgment against the defendant for the amount due, and dismissed the complaint with costs; and thereupon the plaintiffs have appealed.
If the transaction be held to be a chattel mortgage and not a pledge, it is conceded by counsel that it might be foreclosed, as any other mortgage. Treating it as a mortgage, no reason has been suggested why it might not be foreclosed. Nor do we understand counsel as controverting the proposition that a pledgee of personal property may, if he elects so to do, cause the pledge to be sold, under a decree of a Court of Equity, in satisfaction of the debt. But it is insisted that a pledge of commercial paper, such as notes, bonds and bills, stands upon a different footing, on account of their peculiar nature; that in the absence of a contract to that effect, authorizing a sale of them, the pledgee has no power to sell them or cause them to be sold by a decree of a Court or otherwise, and can only make them available by collecting them in due course of law.
For the purposes of this decision, we shall assume that the transaction in question was a pledge and not a chattel mortgage, and shall assume it, also, as a conceded point, that a pledge of personal property may be foreclosed by a decree of a Court of Equity, in the same manner and with like effect [351]*351as if it were a mortgage. This brings ns to the question whether or not a pledge of a bond, bill or promissory note stands upon a different footing. The argument for the respondent on this point is founded chiefly on considerations of public policy. It is said that to permit a sale of such securities would often, and perhaps generally, result in a ruinous sacrifice, greatly injurious to the debtor, and equally so to the creditor, unless he should avail himself of his superior information in respect to the solvency of the maker of the paper, to purchase it at the sale for less than its value, which would be a great hardship upon the pledgor; that a sale of the paper is not necessary to enable the pledgee to make it available for the satisfaction of his demand, inasmuch as he is clothed with the necessary power to enable him to enforce the collection of the security pledged; which is all that the pledgee can reasonably demand.
The leading case relied upon in support of this proposition is Wheeler v. Newbould (5 Duer, 29), and afterward affirmed in 16 New York (2 Smith, 392.)
The facts of the transaction in that case were very similar to those we are considering; but in that case, instead of resorting to a Court of Equity to procure a judicial sale of the note which was pledged, the pledgee caused it to be sold in the market, without a proper demand and notice, and it was the validity of that sale which was in contest. The Court held the sale to be void, first, for want of a proper notice ; and, second, on the ground that in the absence of a contract expressly authorizing a sale, the law would not imply an authority in the pledgee to sell the security for his indemnity, nor any authority except to collect the amount due on the notes which were pledged, and to apply the proceeds in satisfaction of his demand. The precise point before us in this case, to wit, the right of a pledgee to resort to a Court of Equity for a sale of the security, was not involved in that case. The Court does not decide that under special circumstances a sale may not be decreed. On the contrary, it says: “In holding as we do, that a pledge of dioses in action, created by private individuals, and having no market value, is not an implied authority to sell them, we are not to be under[352]*352stood as saying that a sale may not, under special circumstances, be decreed by a Court of Equity. We decline, however, to express or intimate an opinion upon a question which is not before us, and which, when it arises, will demand a serious consideration.” It is evident, however, that the Court intimates that a sale could only be decreed under special circumstances.
In Brown v. Ward (3 Duer, 660), and in the Atlantic Fire and Marine Insurance Co. v. Boies (6 Duer, 583), similar views are expressed in respect to the authority of the pledgee to sell commercial paper pledged as security in satisfaction of the debt. These are the only authorities to Avhich our attention has been called in support of the proposition; and hoAvever the law on that point may be in New York, I am satisfied a different rule must prevail here.
Under Section 246 of our Practice Act, if commercial paper be mortgaged, the mortgage may be foreclosed and the securities sold under the decree; and by Sections 217 and 220, such securities may be seized and sold under execution on a judgment at law. (Davis v. Mitchell, 34 Cal. 87.) We must infer that the policy of our law is not opposed to such sales, Avhen they are expressly authorized on the foreclosure of a mortgage, or upon seizure under an execution at laAV. The same reasons Avhich would forbid the sale of commercial paper which is pledged, would apply Avith full force to a sale of such paper under the foreclosure of a mortgage, or under an execution at law. In each case, the danger of sacrificing it for an inadequate price would be the same; and, inasmuch as a sale is expressly authorized in the íavo latter cases, we can perceive no reason why a different rule should prevail when it is pledged.
The conclusion reached by the Court in Wheeler v. Newbould (supra), and the other cases referred to, is founded on the assumption that commercial paper has no intrinsic market value; that it is not, strictly speaking, merchandise; that its value depends on the solvency of the maker, which may not be generally known; and hence, that if exposed to sale, it would generally sell for an inadequate price, and result in a ruinous sacrifice to the pledgor. It is conceded, [353]*353in these cases, that the bonds of railroad and other like corporations do not fall within the rule, inasmuch as they generally pass by delivery and have a well known market value, and therefore are not likely to be sacrificed at a sale on proper notice. This distinction, however, would appear to be more fanciful than real. Commercial paper, of course, depends for its market value upon the supposed solvency of the maker, and in the neighborhood where he resides it is generally not difficult to ascertain the estimate in which he is held in this respect. At a place remote from his residence, it might be difficult, or impossible, to form any opinion on the subject. In the City of New York no one would doubt the solvency of a citizen generally known to be enormously wealthy—and his promissory note would, doubtless, sell for its full value. In a country village in California, he might be wholly unknown, and his promissory note in that locality might, and probably would, have little or no market value. But the same rule- applies to corporations. The commercial value of their paper depends upon their supposed solvency. In places where they are known'and supposed to be solvent, it would bring its full value in the market; but in remote places, where they are unknown, it might have no market value whatever, however solvent the corporation might be. It is apparent, therefore, that the market value of commercial paper, and of the bonds of public or private corporations, depends on the same conditions, to wit: The extent to Avhich the makers are known in the particular locality, and the estimate in which their solvency is held. The market price of the security, whether of .private persons or of corporations, Avill vary in proportion as the makers of it are, much or little, favorably or unfavorably, known at the place of sale; and though some corporations may be more widely known than a majority of private citizens can be, on the other hand there are many private citizens more generally known than a majority of corporations, and whose wealth and credit are on as stable a basis' as those of any. corporation. These being the facts, I can perceive no valid reason for the distinction made by the [354]*354New York Courts between the two classes of securities, and the rule which they establish will be found, I think, to be inconvenient and impracticable.
But it is conceded that the pledgee may resort to a Court of Equity for a foreclosure and sale in special cases; and, in my opinion, the case we are considering comes within that category. Ferguson, the maker of the note pledged to the plaintiff, resides in New York, and it is not shown that he has any estate in California subject to seizure and sale. The same reasons which would require the plaintiffs to pursue him with .legal process in the Courts of New York, Avould equally demand that they should follow him to Europe, South America or any other foreign country, where he might be knoAvn to be domiciled. This would impose a hardship on the pledgee, which evidently was not within the contemplation of the parties. If that be the rule, the pledgee would be forced to incur all the trouble, expense and hazard of pursuing the maker through the Courts of a foreign country, and, perhaps,, might realize nothing in the end. We think he is under no obligation to incur this trouble and expense, but may go into equity for a foreclosure and sale of the note for whatever it will bring in the market at a judicial sale. The pledgor has due notice of the proceeding, and if the security should bring an inadequate price at the sale, it will be his misfortune, which he might have guarded against by a proper stipulation in the contract. This view of the case renders it unnecessary for us to decide whether the plaintiffs were entitled to a personal judgment against the defendant on the pleading.
Judgment reversed, and -cause remanded for a new trial.